TURKISH CASE. February 24, 2016

Transcription

1 T H E U N D E R S E C R E T A R I A T O F T R E A S U R Y TURKISH CASE Contingent liabilities risk management: Measuring and managing risk related to sovereign guarantees and on-lending HARUN AKKAŞ Head of Credit Risk Management Department General Directorate of Public Finance February 24, 2016 T.C. The Undersecretariat Başbakanlık Hazine Of Treasury Müsteşarlığı Slide 1

2 AGENDA Background Organizational Structure and Mandate Guaranteed and on-lent portfolio (size, entities) Risk analysis and quantification Credit Rating Model (flow of working process, PD) Model outcomes (internal credit rating, expected losses) Application in Risk Management Policy tools for risk mitigation Tools based on model outcomes Other tools Monitoring & Reporting Lessons learned The Undersecretariat Of Treasury Slide 2

3 Organizational Chart Credit Risk Management Department Staff 1 Head Of Department, 3 experts, 2 assistant experts The Undersecretariat Of Treasury Slide 3

4 Mandate Monitor, evaluate and adopt measures for credit risk arising from 1. Guarantees Credit guarantees (to loan repayments) Investment guarantees (to PPP projects) 2. Treasury Receivables Receivables from on-lent loans Receivables from undertakings of guarantees 3. Debt assumption commitments (to PPP projects) The Undersecretariat Of Treasury Slide 4

5 (Million USD) Treasury Credit Gurantees & On-Lent Debt Stock Credit Gurantee Debt Stock (2014) 16,000 14,000 Credit Guarantees On-Lent Total 13,674 12,000 11,156 10,000 8,000 On-Lent Debt Stock (2014)* 6,000 4,000 2,000 2, *Stock of projected receivables from external debt The Undersecretariat Of Treasury Slide 5

6 Risk Analysis (Credit Rating Model) The Undersecretariat Of Treasury Slide 6

7 Risk Quantification The Undersecretariat Of Treasury Slide 7

8 Risk Management Applications (Based on Expected Loss) Aim: Compensate the losses stem from these credits at least partially Between 0,1% and 1% of total amount Directly proportional to the expected losses Aim: Share the risk with the creditor Between 80% and 95% of the total debt Inversely proportional to the expected losses The Undersecretariat Of Treasury Slide 8

9 Risk Management Applications (Based on Expected Loss) Guarantee & On-Lending Limit Limit on the amount of Treasury guarantees and on-lending Annual Budget Law Composed of guarantee fees, budget allocations, collections from receivables (guarantee assumptions) Risk Account Used when beneficiary defaults Precautionary account for unexpected cash needs The Undersecretariat Of Treasury Slide 9

10 Risk Management Applications (Other Tools) No overdue liability to Treasury Pre-Conditions Stay within the guarantee and on-lending limit Sound financial capacity Escrow account for Municipalities and their affiliates Foreign Debt Payment Account Canalizes incomes of Municipalities to the escrow account Guarantees timely payment of external debt The Undersecretariat Of Treasury Slide 10

11 Monitoring & Reporting Public Debt Management Report (monthly/annual) Guaranteed Stock/Receivables Stock Undertaken Amounts Debt Service Projections of guaranteed debt stock Guarantees / On-lent Loans Provided Risk Account Realizations Fiscal Risk Bulletin (Quarterly) - internal Performance of Risk Account (Quarterly) - internal 11/38 The Undersecretariat Of Treasury Slide 11

12 Guaranteed External Debt (Million USD) Undertakings arising from Treasury Guarantees (Million US Dollar) Statistics Treasury Guaranteed Debt Stock & Undertakings from these guarantees 12, ,000 10, , ,000 7, , ,000 4, , ,000 1, Guaranteed External Debt Undertaken Debt The Undersecretariat Of Treasury Slide 12

13 Statistics The Distribution of Treasury Guaranteed Credit and On-Lent Stock by Credit Rating(%) The Undersecretariat Of Treasury Slide 13

14 Lessons Learned Management of credit risks that arise from contingent liabilities gets even greater importance for maintaining fiscal discipline and efficient cash and debt management Building up legal framework is imperative Choose a risk analysis method and measure your credit risk Benefit from risk mitigation policy tools effectively Evaluate your model s performance periodically Share the results with appropriate report formats Do not forget; it is a long-term process The Undersecretariat Of Treasury Slide 14

15 Thank you The Undersecretariat Of Treasury Slide 15

16 APPENDIX The Undersecretariat Of Treasury Slide 16

17 Risk Analysis (Calculation of PD) The Undersecretariat Of Treasury Slide 17

18 Risk Quantification (Calculation of Expected Loss) The Undersecretariat Of Treasury Slide 18